Last checked at 27 Jan 2009 07:00
CFX
COLEFAX GROUP PLC
("Colefax" or the "Group")
Half Year Results
for the six months ended 31 October 2008
Colefax is an international designer and distributor of furnishing fabrics & wallpapers and owns a leading interior decorating business.
The Group trades under five brand names, serving different segments of the soft furnishings marketplace; these are Colefax and Fowler, Cowtan & Tout, Jane Churchill, Manuel Canovas and Larsen.
Key Points
Results in line with expectations
Sales of £36.72m (2007: £38.61m)
Interim dividend of 1.55p (2007: 1.55p)
Trading environment expected to worsen although stronger dollar is beneficial
David Green, Chairman, commenting, said:
"Our principal market, the US, started to deteriorate significantly in August 2008 whereas, in the UK, conditions remained relatively robust throughout 2008. As anticipated, all our major markets are now seeing the impact of the global economic downturn and current trading is best described as 'tough, getting tougher'.
The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise."
Enquiries:
| Colefax Group plc | David Green, Chairman | Tel: 020 7493 2231 |
| KBC Peel Hunt (Nominated Adviser & Broker) | David Anderson | Tel: 020 7418 8900 |
| Biddicks | Katie Tzouliadis | Tel: 020 7448 1000 |
COLEFAX GROUP PLC
CHAIRMAN'S STATEMENT
Financial Results
The Group's pre-tax profit for the six months to 31 October 2008 decreased by 25% to £2.48 million (2007: £3.32 million) on sales down 5% at £36.72 million (2007: £38.61 million). Earnings per share decreased by 22% to 11.65p (2007: 15.02p). The Group ended the six months with net cash of £2.24 million (2007: net debt of £745,000).
During the period, the Group purchased for cancellation 550,000 shares at an average price of £1.63 per share, representing 3.6% of the Group's issued share capital at the start of the year.
The Board has decided to hold the interim dividend at 1.55p per share (2007: 1.55p per share). The interim dividend will be paid on 14 April 2009 to shareholders on the register at the close of business on 13 March 2009. In the current volatile economic climate, we will keep our dividend policy under review, dependent upon our results.
Trading conditions in our principal market, the US, started to deteriorate significantly in August 2008, whereas the UK remained relatively robust throughout the whole of 2008. Market conditions in Europe are varied but all our major markets are trending lower. The 25% reduction in our interim profits is mainly due to a lower profit contribution from our Decorating Division, where sales were down 37% compared to a strong first half last year.
Product Division
Sales in the Fabric Division, which represent 86% of the Group's sales, increased by 1% to £31.40 million (2007: £30.97 million) but decreased by 6% on a constant currency basis.
Sales in the US, which represent 51% of the Fabric Division's turnover, decreased by 9% on a constant currency basis (2007: increase of 12%). The decline in sales started in August 2008 and deteriorated towards the end of the year, with sales down by 18% in the eight weeks to the end of December.
Sales in the UK, which represent 21% of the Fabric Division's turnover, were flat through to the end of October. For the eight weeks to the end of December, sales were down by 6%. We are concerned by the lack of transaction activity in the high end housing market as historically our trading performance lags this economic indicator.
Sales in Continental Europe, which represent 25% of the Fabric Division's turnover, increased by 8% due to the appreciation in the Euro. On a constant currency basis, sales decreased by 6% in the period.
Sales in the rest of the world, which represent 3% of the Fabric Division's turnover, increased by 2% although growth prospects appear limited given current market conditions.
Sales of furniture, which account for 4% of Group sales, decreased by 5% during the period. The majority of furniture sales are in the UK and we believe that the reasonable first half performance does not yet reflect the impact of the downturn in the high end housing market. Furniture sales are now starting to see increasingly significant decreases on a month by month basis and we believe that 2009 will be extremely challenging.
Accessories comprise sales of beachwear and scented candles and the majority of sales occur in the second half of the year. Our new management team has made significant improvements to both the range and the distribution of the product line but we expect the difficult retail environment to hold back progress for at least the next twelve months.
Interior Decorating Division
Decorating sales decreased by 37% compared to a very strong first six months last year. Part of the sales decrease is due to the timing of contract completions although the full year result will be down on last year's exceptional performance.
Prospects
Current trading is best described as 'tough, getting tougher' and it is difficult to forecast accurately the level of sales over the coming months. However, I would expect to see a significant like-for-like sales decline next year. The renewed strength of the US Dollar benefits the Group and should off-set some of the decline in trading activity although, this year, we will not benefit fully due to hedging contracts in place for the second half of the year. Next year there will be a significant margin improvement from the stronger US Dollar.
The Group has a broad geographical spread of business and strong balance sheet including net cash of £2.2 million. It is well placed to weather the economic downturn and take advantage of any opportunities that may arise.
David Green
Chairman
COLEFAX GROUP PLC
| INTERIM GROUP INCOME STATEMENT | |||||
| For the six months ended 31 October 2008 | |||||
| Unaudited | Unaudited | Audited | |||
| Six Months | Six Months | Year | |||
| to 31 Oct | to 31 Oct | to 30 April | |||
| 2008 | 2007 | 2008 | |||
| £'000 | £'000 | £'000 | |||
| Revenue | 36,723 | 38,608 | 78,181 | ||
| Profit from operations | 2,486 | 3,373 | 6,081 | ||
| Finance income | 41 | 76 | 127 | ||
| Finance expense | (46) |
| (127) | (266) | |
|
| (5) |
| (51) |
| (139) |
| Profit before taxation | 2,481 | 3,322 | 5,942 | ||
| Tax expense | (819) |
| (1,096) | (1,877) | |
| Profit for the period attributable to the equity holders of the parent | 1,662 |
| 2,226 |
| 4,065 |
| Basic earnings per share | 11.65p | 15.02p | 27.50p | ||
| Diluted earnings per share | 11.06p | 14.44p | 26.10p | ||
COLEFAX GROUP PLC
| INTERIM GROUP BALANCE SHEET | ||||||||
| As at 31 October 2008 | ||||||||
| Unaudited | Unaudited | Audited | ||||||
| at 31 Oct | at 31 Oct | at 30 April | ||||||
| 2008 | 2007 | 2008 | ||||||
| £'000 | £'000 | £'000 | ||||||
| Non-current assets: | ||||||||
| Property, plant and equipment | 5,296 | 5,056 | 4,960 | |||||
| Deferred tax asset | 2,079 |
| 2,091 | 1,991 | ||||
| 7,375 | 7,147 | 6,951 | ||||||
| Current assets: | ||||||||
| Inventories and work in progress | 14,918 | 13,118 | 13,357 | |||||
| Trade and other receivables | 10,149 | 11,034 | 10,561 | |||||
| Cash and cash equivalents | 2,668 |
| 5,623 | 3,862 | ||||
| 27,735 | 29,775 | 27,780 | ||||||
| Trade and other payables: | ||||||||
| Current corporation tax | 1,017 | 1,308 | 995 | |||||
| Derivative financial instruments | 822 | - | - | |||||
| Other amounts falling due in one year | 12,733 |
| 18,277 | 14,152 | ||||
| 14,572 | 19,585 | 15,147 | ||||||
| Net current assets | 13,163 | 10,190 | 12,633 | |||||
| Total assets less current liabilities | 20,538 | 17,337 | 19,584 | |||||
| Non-current liabilities: | ||||||||
| Deferred tax liability | 284 | 130 | 123 | |||||
| Pensions liability | 247 |
| 195 | 232 | ||||
| 531 | 325 | 355 | ||||||
| Net assets | 20,007 |
| 17,012 | 19,229 | ||||
| Capital and reserves attributable to equity holders of the Company: | ||||||||
| Called up share capital | 1,481 | 1,565 | 1,536 | |||||
| Share premium account | 11,148 | 11,141 | 11,148 | |||||
| Capital redemption reserve | 1,393 | 1,308 | 1,338 | |||||
| ESOP share reserve | (20) | (287) | (20) | |||||
| Share based payment reserve | 664 | 228 | 664 | |||||
| Foreign exchange reserve | 1,098 | (105) | 124 | |||||
| Cash flow hedge reserve | (592) | - | - | |||||
| Retained earnings | 4,835 | 3,162 | 4,439 | |||||
| Total equity | 20,007 |
| 17,012 | 19,229 | ||||
COLEFAX GROUP PLC
| INTERIM GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSES | |||||
| For the six months ended 31 October 2008 | |||||
| Unaudited | Unaudited | Audited | |||
| Six Months | Six Months | Year | |||
| to 31 Oct | to 31 Oct | to 30 April | |||
| 2008 | 2007 | 2008 | |||
| £'000 | £'000 | £'000 | |||
| Profit for the period | 1,313 | 2,226 | 4,065 | ||
| Currency translation differences on foreign currency net investments | 1,590 | (226) | 704 | ||
| Deferred tax on long-term loan foreign currency movements | (616) | 121 | (41) | ||
| Unrealised losses on cash flow hedges | (822) | - | - | ||
| Deferred tax on unrealised losses on cash flow hedges | 230 | - | - | ||
| Total recognised income and expenses relating to the period | 1,695 |
| 2,121 | 4,728 | |
COLEFAX GROUP PLC
| INTERIM GROUP CASH FLOW STATEMENT | |||||||||
| For the six months ended 31 October 2008 | |||||||||
| Unaudited | Unaudited | Audited | |||||||
| Six months | Six months | Year | |||||||
| to 31 Oct | to 31 Oct | to 30 April | |||||||
| 2008 | 2007 | 2007 | |||||||
| £'000 | £'000 | £'000 | |||||||
| Operating activities: | |||||||||
| Profit before taxation | 2,481 | 3,322 | 5,942 | ||||||
| Finance income | (41) | (76) | (127) | ||||||
| Finance expense | 46 | 127 | 266 | ||||||
| Depreciation | 847 |
| 814 |
| 1,690 | ||||
| Cash flows from operations before changes in working capital | 3,333 |
| 4,187 |
| 7,771 | ||||
| Increase in inventories and work in progress | (903) | (1,156) | (1,215) | ||||||
| Decrease/(increase) in trade and other receivables | 732 | (1,510) | (672) | ||||||
| (Decrease)/increase in trade and other payables | (991) |
| (157) |
| 1,143 | ||||
| Cash generated from operations | 2,171 |
| 1,364 |
| 7,027 | ||||
| Taxation paid | |||||||||
| UK corporation tax paid | (907) | (955) | (2,002) | ||||||
| Overseas tax received/(paid) | 128 | (127) | (307) | ||||||
| (779) |
| (1,082) |
| (2,309) | |||||
| Net cash inflow from operating activities | 1,392 |
| 282 |
| 4,718 | ||||
| Investing activities: | |||||||||
| Payments to acquire property, plant and equipment | (693) | (828) | (1,448) | ||||||
| Receipts from sales of property, plant and equipment | 7 | 10 | 10 | ||||||
| Interest received | 33 | 76 | 125 | ||||||
| Net cash outflow from investing | (653) |
| (742) |
| (1,313) | ||||
| Financing activities: | |||||||||
| Purchase of own shares | (895) | - | (465) | ||||||
| Interest paid | (46) | (100) | (280) | ||||||
| Equity dividends paid | (373) | (378) | (604) | ||||||
| Net cash outflow from financing | (1,314) |
| (478) |
| (1,349) | ||||
|
|
|
|
|
| |||||
| (Decrease)/increase in cash in the period | (575) |
| (938) |
| 2,056 | ||||
COLEFAX GROUP PLC
| NOTES | |
| 1. | The interim results have been prepared in accordance with the accounting policies of the Group under International Financial Reporting Standards (IFRS) and on the basis of the accounting policies set out in the annual report and accounts for the year ended 30 April 2008, which have remained unchanged with the exception of the adoption of hedge accounting as detailed in note 5 below. |
| These standards and interpretations are subject to ongoing review and endorsement by the EU or possible amendment by interpretive guidance from the International Financial Reporting Interpretations Committee ('IFRIC') and are therefore still subject to change. | |
| 2. | During the financial period ended 31 October 2008, the Company paid a final dividend for the year ended 30 April 2008 of 2.65p per ordinary share giving a total dividend of £372,666. |
| The proposed interim dividend of 1.55p (2007: 1.55p) per share is payable on 14 April 2009 to qualifying shareholders on the register at the close of business on 13 March 2009. | |
| 3. | Basic earnings per share have been calculated on the basis of earnings of £1,662,000 (2007: £2,226,000) and on 14,268,557 (2007: 14,816,510) ordinary shares being the weighted average number of ordinary shares in issue during the period. |
| 4. | Diluted earnings per share have been calculated on the basis of earnings of £1,662,000 (2007: £2,226,000) and on 15,035,512 (2007: 15,408,152) ordinary shares being the weighted average number of ordinary shares in the period adjusted to assume conversion of all dilutive potential ordinary shares of 766,955 (2007: 591,642). |
| 5. | Due to the international nature of its operations, the Group faces currency exposures in respect of exchange rate fluctuations against sterling. The Group minimises this currency translation exchange risk by the use of forward contracts. |
| From 1 May 2008, the Group has elected to adopt hedge accounting as permitted under IAS 39 (Financial instruments: recognition and measurement) and account for unrealised gains and losses on forward exchange contracts through a cash flow hedge reserve, when the conditions for hedge accounting are met. When gains and losses on these hedges are realised the gain or loss is transferred to the profit and loss account. | |
| 6. | The interim accounts are unaudited. The above financial information does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985 (as amended). |
| A copy of the statutory accounts for the year ended 30 April 2008, which were prepared under IFRS, has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under section 237 (2)-(3) of the Companies Act 1985 (as amended). | |
| 7. | Copies of the interim report are being sent to shareholders and will be available from the Company's website on www.colefaxgroupplc.com. Copies will also be made available on request to members of the public at the Company's registered office at 39 Brook Street, London W1K 4JE. |